Wilson Owned Equipment with an Estimated Life of 10 Years

question 92

Multiple Choice

Wilson owned equipment with an estimated life of 10 years when it was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2012. On January 1, 2012, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years. On April 1, 2012 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends: $\begin{array}{lrrr}&2012&2013&2014\\\text { Net income } & \$ 100,000 & \$ 120,000 & \$ 130,000 \\\text { Dividends } & 40,000 & 50,000 & 60,000\end{array}$ Compute Wilson's share of income from Simon for consolidation for 2013.

• A)$108,000.
• B)$110,000.
• C)$106,000.
• D)$109,825.
• E)$109,800.

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Definitions:

Cash Receipts

The money a company receives from its various business activities, typically including sales, services, loans, or any transactions that bring cash into the organization.

Cash Disbursements

The process of paying out cash for various purposes, which could include expenses, investments, or dividends.

Master Budget

A comprehensive financial planning document that includes all of the subsidiary budgets within an organization, projecting its financial activities for the period.

Raw Materials Production Needs

The quantity and type of raw materials required to meet production schedules for finished goods.